COVID-19 and the Housing Market

What does COVID-19 mean for the housing market?

It’s complicated.

As the coronavirus sweeps the country, the stock market has become sporadic and mortgage interest rates are fluctuating – at some points, by the hour.

The Federal Reserve has twice in two weeks slashed short-term interest rates in an attempt to balance the stock market, which originally led to mortgage rates as low as 3.13% on March 2. By March 20, according to realtors.com, rates shot back to 4.15%. That made it “the most significant jump in history,” says Thomas Forker, senior vice president at Bryn Mawr Trust.

Regardless, those rates are still much lower than 15 months ago, Forker says. If you have good credit, this could be an opportunity for you to get a lower rate.

Mortgage refinancing applications have soared because of the low interest rates, as well as the general turmoil the world’s markets are in because of COVID-19. This has led to a backlog of applications, so you may experience longer wait times.

Should you refinance your mortgage?
Matt Anderson, a financial planner for Baird’s Wise Investor Group, suggests you ask yourself these questions first:

How long do you plan to be in your home?
Refinancing doesn’t necessarily lower your payments right away – typically, there are upfront costs, which can take 12 to 15 months to recoup. Make sure you will be living in your home long enough to reach the break-even point.

What is the age of your current loan?
Even if you will break even, if you’ve been paying off your current loan for a long time, there may be a second point later where you start losing money because the loan extends.

What will you do with the monthly savings?
If you do choose to refinance, Anderson suggests you wisely use your monthly savings: 1) Continue paying the same amount before refinancing and the additional will go toward the principal; 2) pay down high-interest credit cards or other personal debt; or 3) put it toward investments or other savings, such as a Health Savings Account or 529 college savings plan.
What will tomorrow bring? As COVID-19 continues to threaten the country with so many unknowns, experts can’t answer that question. Forker says, eventually, markets will return to normal. He suggests “letting this settle down” before coming to a decision.

Do you have questions about your mortgage?
First Nebraska Credit Union is here to help you. While our lobbies are temporarily closed due to the COVID-19 outbreak, we are able to review your financial situation and make recommendations based on your individual needs. Please give us a call at (402) 492-9100 to find out more information and schedule an appointment.

Sources:
https://www.washingtonpost.com/business/2020/03/18/should-you-join-rush-refinance-your-mortgage-now/
https://money.com/mortgage-rates-refinance-or-wait/